Rising profitability and surplus capacity are combining to ease the pressure on premium rates, according to leading broker Marsh.

Its latest Insurance Market Review says rising profitability and an abundance of capacity have kept the lid on a competitive Australian market.

Marsh Executive Director Scott Leney says relatively low catastrophe losses, improved investment income and the continued release of loss reserves saw most segments of the market return to profitability by the end of last year.

“These factors have led to relatively favourable conditions for most insurance buyers.”

Mr Leney says buyers are still facing a wide disparity of outcomes at renewal, but conditions are generally easing.

“In the first quarter we saw a perceptible shift in the attitude of insurers from a position of consolidation and recovery in 2009 to a more aggressive stance, with many indicating their intention to grow the top line of business,” he said.

“Those that don’t expand their appetites will gradually lose market share to those with a broader risk appetite.”

Property and public liability lines highlighted the disparity in available rates, ranging from hikes of 10% on loss-making accounts to 10% discounts on more attractive risks.

The Marsh report says changing market conditions are less pronounced among small and medium clients, but should also eventuate in that sector during the June 30 renewals.

It says recent catastrophes have failed to arrest the downward trend in rates, although insurers have maintained underwriting discipline despite more aggressive approaches to the market.